211 Power to stay or restrain proceedings against a company

Power to stay or restrain proceedings against a company

The purpose of the power of stay under Section 222 of the Act was to enable the court to ensure that no creditor should gain priority over others of the creditors’ class. This approach, which was intended to prevent a scramble by the creditors while the court was considering whether to wind up the company or not, again supported the fact that Section 222 of the Act only gave the court the power to stay further proceedings in the action or proceedings, other than hearing the winding-up petition pending before the court.

It has been decided in the cases listed below that an appeal does not act as stay of proceedings to wind up a company:

(1) In Bank Utama (M) Bhd v GKM Amal Bhd [2000] 5 MLJ 657 it was held that “The judgement is good until it is set aside on appeal, and it is enforceable unless a stay has been granted. The fact that the debtor has lodged an appeal against the judgment merely means that he still disputes the debt but does not establish that the debt is bona fide disputed”, and

(2) In Pontian United Theatre Sdn. Bhd. v Southern Finance Bhd. (formerly known as United Merchant Finance Bhd.) [2006] 2 MLJ 602 it was held that “A judgement for a sum establishes a debt, which then becomes due to the person to whom it is owed, who then becomes a creditor. The sum remains due even though the debtors’ appeal against the judgment is pending, because an appeal does not operate as a stay of execution”.